By Valentina Pasquali
On the tail of the European economic crisis, the relationship between the United Kingdom and the European Union is nearing a breaking point.
While in Brussels some members are pushing for further integration, in London a growing chorus of voices at the government’s highest levels are demanding a renegotiation of the terms of the agreement with the Union, if not an outright exit.
Recently, a group of more than 100 Conservative MPs, backed by foreign secretary William Hague, published a manifesto, titled Fresh Start, asking for the repatriation of legislative powers in areas such as employment, law enforcement, criminal justice and financial services, and seeking to reduce the country’s EU fees. At the same time, the Independence Party (UKIP) and the bipartisan campaign The People’s Pledge are urging a referendum on continued EU membership.
Under pressure from his own party, PM David Cameron is embracing calls for loosening ties with the EU and is promising a referendum of some kind after the 2015 election.
“A referendum looks almost inevitable now but the timeframe is uncertain,” says Katinka Barysch, deputy director of the Centre for European Reform in London. She says the debate is already having a negative economic impact: Investors are getting nervous. “Rather than chasing UKIP votes, the Conservative party would be better advised to explain to the British people how they benefit from being part of Europe,” says Barysch.
Some analysts are saying that London has little to lose by distancing itself from Brussels. In a note last year, Capital Economics’ chief UK economist, Vicky Redwood, pointed out that the UK could leave the EU but still be part of the single market, in the same way that Norway and Iceland are. Or it could follow Switzerland’s lead, signing bilateral treaties with individual countries. And there would be benefits too, such as an end to regulations coming from Brussels. With the EU still on a weak economic footing, noted Redwood, “taking a step back in the current climate could increase the UK’s attractiveness for international investors.”